Large Institution Supervision Coordinating Committee
Under applicable law, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Board of Governors of the Federal Reserve System (Board) has the responsibility for the supervision of systemically important financial institutions, including large banking organizations and nonbank financial companies that are designated by the Financial Stability Oversight Council (FSOC) for supervision by the Board. To fulfill this mandate and to reorient its supervisory program in response to the supervisory lessons learned from the financial crisis, the Federal Reserve created the Large Institution Supervision Coordinating Committee (LISCC) supervisory program in 2010 to coordinate its supervisory oversight of large financial institutions that pose the greatest risk to U.S. financial stability.
LISCC firms include (i) any firm subject to Category I standards under the regulatory tailoring framework, (ii) any non-commercial, non-insurance savings and loan holding company that would be identified for Category I standards if it were a bank holding company, and (iii) any nonbank financial institution designated as systemically important by the FSOC.1
Current LISCC Firms
- Bank of America Corporation
- The Bank of New York Mellon Corporation
- Citigroup Inc.
- The Goldman Sachs Group, Inc.
- JP Morgan Chase & Co.
- Morgan Stanley
- State Street Corporation
- Wells Fargo & Company
The LISCC supervisory program is designed to promote the resiliency of systemically important firms and minimize the impact that their material distress or failure could pose on the broader financial system.
The LISCC supervisory program combines firm-specific, safety and soundness perspectives with a broader, horizontal view of the industry in order to maintain the safety and soundness of individual firms as well as to anticipate and mitigate threats to financial stability. Key characteristics of the LISCC supervisory program include:
- Focus on U.S. financial stability as well as individual firm safety and soundness;
- System-wide multi-disciplinary input into the direction and execution of the supervisory program;
- Use of both firm-specific and horizontal examinations in all core areas of the program;
- Forward-looking assessments of firms’ resiliency; and
- Integration of multiple sources of data and information to detect risks and trends in the portfolio.
LISCC Supervisory Program Governance and Structure
The LISCC supervisory program consists of the LISCC, the Operating Committee (OC), the Office of the OC, the Dedicated Supervisory Teams (DSTs), and five portfolio programs.2 These are depicted in Figure 1.
The LISCC supervisory program is a System-wide program, staffed by individuals from multiple Reserve Banks and the Board. Day-to-day supervision is carried out by the DSTs and the portfolio programs.
Large Institution Supervision Coordinating Committee (LISCC)
The LISCC is the multidisciplinary body that oversees the LISCC supervisory program. It is comprised of senior officers from across the Federal Reserve System, including the Vice Chair for Supervision, several Reserve Bank heads of supervision, and division directors at the Board.
The Director of the Division of Supervision and Regulation (S&R Director) at the Board serves as Chair of the LISCC. The S&R Director is ultimately responsible for the effective supervision of LISCC firms and is accountable in this regard to the Vice Chair for Supervision and to the Board. As Chair of the LISCC, the S&R Director takes guidance, advice, and recommendations from other LISCC members. The Vice Chair for Supervision serves as an ex officio member of the LISCC.
Operating Committee (OC)
The OC executes the LISCC supervisory program. Specifically, the OC sets strategic direction, oversees the effectiveness of the DSTs and portfolio programs, and reviews and approves supervisory ratings and recommendations regarding potential supervisory actions, including enforcement actions. The OC also ensures that the supervisory program has sufficient and well-allocated resources, has efficient and controlled processes, and promotes a culture that enables the supervisory program to be effective.
The OC is multi-disciplinary and comprised of senior officers from several Reserve Banks and the Board, which helps ensure that a diverse set of perspectives are factored into decision-making for LISCC firms. The OC chair is accountable for decisions made by the OC.
Office of the OC
The Office of the OC (OOC) provides infrastructure for and oversight of the operational and strategic functions of the LISCC supervisory program, as well as operational direction and guidance to promote program effectiveness, efficiency, quality, and compliance with Federal Reserve System standards. The OOC is comprised of functional areas covering communications, human resources, technology and reporting, operations, quality control, and a corporate secretary.
Dedicated Supervisory Teams (DSTs)
The LISCC supervisory program maintains a DST for each LISCC firm. For the assigned firm, the DST executes examinations and monitoring, maintains a broad-based understanding of the firm’s safety and soundness, and recommends supervisory plans, ratings, and enforcement actions.
The DST maintains deep knowledge of its supervised firm’s strategy, risk profile, governance, and risk management and control functions in order to support a cohesive, real-time view of the firm. The DST serves as the primary contacts for the assigned firm and communicates supervisory messages, including supervisory ratings and annual assessments.
The DSTs work closely with their counterparts at other supervisory agencies, including the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission, and foreign supervisors.
The DSTs are overseen by a committee of Reserve Bank senior officers, who are responsible for overseeing the DSTs in each Federal Reserve district where a LISCC firm is headquartered. This committee helps to ensure that the DSTs maintain a well-supported, holistic view of their firms. The committee also provides oversight and direction to the DSTs related to supervisory ratings, supervisory planning, examination and monitoring output, hiring, and succession planning.
In addition, each Reserve Bank maintains a process to ensure divergent views related to supervisory matters are thoroughly discussed and elevated, as appropriate.
The LISCC supervisory program maintains five portfolio programs. Three of the portfolio programs – Capital, Liquidity, and Governance and Controls – are aligned with the components of the supervisory rating framework (capital planning and positions, liquidity risk management and positions, and governance and controls).3 There is also a distinct program for Recovery and Resolution Preparedness and a non-assessment program focused on Monitoring and Analysis.
Each portfolio program is responsible for executing horizontal examination and monitoring work, coordinating firm-specific examinations, and issuing supervisory findings, including matters requiring attention, based on this work. The portfolio programs maintain a detailed knowledge of the practices and capabilities of LISCC firms in their respective areas, which informs the assessments of individual LISCC firms as well as the identification of emerging trends across the industry.
Each portfolio program is overseen by a steering committee. The program steering committees are responsible for directing and overseeing day-to-day supervision and making recommendations to the OC regarding supervisory planning, ratings, enforcement actions, and resource allocation. The steering committees also ensure quality control of processes, products, and outcomes and oversee performance management of program staff. The program steering committees are multi-disciplinary and comprised of staff from across the Federal Reserve System, which helps ensure that a diverse set of perspectives are factored into decision-making for LISCC firms.
Each program steering committee is chaired by two co-chairs, who are accountable for decisions made by the portfolio programs. In reaching decisions on supervisory findings and assessments, the OC Chair and the steering committee co-chairs encourage debate and discourse. In addition, each program maintains a process to ensure divergent views are thoroughly discussed and elevated, as appropriate.
The portfolio programs are described in more detail below.
The Capital Program assesses the effectiveness of LISCC firms’ capital planning processes and the sufficiency of their capital positions. The primary horizontal exercise – Comprehensive Capital Analysis and Review – is conducted across firms and focuses on assessing the reliability of firms’ stressed capital projections, the controls around those projections, and the governance of firms’ internal capital adequacy assessments. Other examinations are tailored to the most material risks that could affect the capital of LISCC firms (e.g., credit risk, market risk, and all financial risks other than liquidity) and aim to support a complete assessment of the effectiveness of each firm’s capital planning practices and risk management.
The Liquidity Program assesses the effectiveness of LISCC firms’ liquidity risk management practices and the sufficiency of their liquidity positions. The Comprehensive Liquidity Analysis and Review is the body of horizontal examination work conducted each year that focuses on assessing firms’ internal liquidity stress tests and liquidity risk management capabilities. The Liquidity Program also conducts independent quantitative analyses of the sufficiency of firms’ liquidity positions, as well as firm-specific examinations.
The Governance and Controls (G&C) Program assesses the effectiveness of LISCC firms’ boards of directors, management of business lines (MBL), and independent risk management and controls (IRMC) through horizontal and firm-specific examinations and monitoring activities. Assessments of board effectiveness focus on board oversight of senior management and support of independent risk management and internal audit, while assessments of MBL and IRMC focus on how well risk is identified, measured, monitored, and controlled. Non-financial risks, such as compliance, operational resilience, cyber and information technology, are also covered by the G&C Program.
The Recovery and Resolution Program (RRP) assesses the effectiveness of LISCC firms’ preparedness for recovering from a severe stress and for being resolved in an orderly manner without threatening financial stability. The review of LISCC firms’ resolution plans submitted under Title I of the Dodd-Frank Act is conducted horizontally and culminates in joint determinations by the Board of Governors of the Federal Reserve and the FDIC board of directors. The program also coordinates with other prudential and resolution authorities.
The Monitoring and Analysis Program (MAP) identifies and explores emerging risks to inform supervisory planning, prioritization, and policymaking, and to facilitate risk awareness among the other portfolio programs and the dedicated supervisory teams. MAP gathers and analyzes information and intelligence on LISCC firms from a range of internal and external sources, and through baseline monitoring and periodic structured risk identification exercises. MAP also coordinates in-depth explorations and analyses of select topics surfaced through the risk identification process. In contrast to the other portfolio programs, MAP does not conduct assessments of firms, assign ratings, or issue supervisory findings. MAP leverages a wide network of resources and information to facilitate the identification and exploration of topics and risks related to LISCC firms that are new, changing, misunderstood, or underappreciated, to ensure that supervision of LISCC firms adapts to changes in the financial industry and broader economy.
1. 84 FR 59032 (November 1, 2019); 12 CFR parts 238 and 252. Return to text
2. The portfolio programs include the Capital Program, the Liquidity Program, the Governance and Controls (G&C) Program, the Recovery and Resolution Preparedness (RRP) Program, and the Monitoring and Analysis Program (MAP). Return to text
3. SR 19-3/CA 19-2. Return to text